Killing The Golden Goose: Is Hollywood To Blame For Netflix's Poorly Thought Out Massive Price Hike?

from the what-blockbuster-and-walmart-couldn't-kill... dept

If you remember back a decade ago, Netflix was definitely the darling of the modern movie rental business, but there was concern everywhere that the "little startup" was about to get killed when bigger competitors entered the market. After all, Walmart itself created a near-identical copycat offering in 2002. In 2004, Amazon started kicking the tires on a Netflix-like offering as well (amusingly, Netflix broke the news of Amazon's impending arrival in the market, effectively deflating some of the hype for Amazon's own announcement). And, of course, all along there was Blockbuster. The king of movie rentals in the 90s was going to destroy Netflix with its own offering, leveraging its brick-and-mortar stores, according to the common wisdom.

Exactly none of that played out the way people expected. Netflix continued to grow, and successfully expanded into video streaming, rather than just DVD rentals, with a very convenient flat-rate program. Walmart gave up on its Netflix-like business in 2005, and actually handed over the keys to Netflix, to let it run Walmart's online movie rental business. Amazon realized it couldn't really compete with DVD rentals and never brought that business to the US. Blockbuster tried over and over again to compete, but never got much traction, went bankrupt, and eventually was bought by Dish Network earlier this year.

Meanwhile, Netflix has continued to thrive, and plenty of people have pointed to its online streaming, which represents a giant chunk of US internet traffic, as an example of how if you provide a convenient, user-friendly and well-priced offering, you can compete with unauthorized file sharing. With Netflix, the company seems to realize that it's that convenience and access that people are paying for, rather than the content itself.

But, of course, as with so many things involving technology and services that make content more valuable, the copyright holders get jealous and start complaining that they're not making enough. With Netflix's growing power, the studios have been on the warpath to cripple Netflix in protest of the current pricing scheme. In some ways, they really hate some of Netflix's early deals, which allowed the company to offer such a convenient and reasonably priced offering. Pretty much all of the later online streaming movie offerings are, instead, forced to play by the big studios' rules, which makes most of those services totally undesirable.

Given all that, it's hardly a surprise that Netflix decided it needed to raise its prices around 60% for many users. AS you've probably heard, they've basically separated the physical DVD rentals and the online streaming, which used to be included with most accounts. Now you have to pay for each separately, so to get what people had before, their bills are going up quite a bit.

The result of this announcement has been all over the internet (including Netflix's blog and Facebook page), and it would be safe to say that everyone hates the new pricing with a passion. It's incredibly aggressive on the pricing front, but it's not difficult to see why Netflix did this. First, the competitive playing field looks a lot clearer today than it did a few years ago. When companies have no real competition, they jack up prices massively.

Second, however, I'd bet that Netflix is currently in a battle to control its destiny behind closed doors with Hollywood. The studios are demanding lots more cash than in the past, and Netflix seems to think that jacking up prices quite a lot is one way to get the necessary revenue. But Hollywood, of course, couldn't care much less if Netflix survives. They still think that their endorsed crappy online services, with their DRM and massive limitations, is legitimate competition.

So while some are blaming Netflix for the giant price hike, I think it makes more sense to look at the studios and their unwillingness to fully embrace Netflix, always worrying that it would "take away" from their existing business lines.

As Netflix (especially streaming) becomes a bigger part of the total market, their cost for product will go up.

Think of it in freemarket terms. There is a very limited number of movies, and demand to see them far outstrips supply (on the streaming side). If Netflix won't pay the high price, someone else will and Netflix will have no flix.

New Opportunites

Between the price hikes and the 30 day delay on new DVD releases, it looks like an opportunity for a DVD rental company to step in and fill the gap.
Competing on streaming would be harder, but competing on physical media should be easier.

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Except in freemarket terms, there is direct competition from piracy.

Netflix was doing well at their previous pricepoints, demonstrating as Mike is always saying that you can compete with free.

Whether what they offer will still be able to compete with free now they're hiking their charges will depend on whether their customers still find the service to be worth the price.
From a lot of comments (comments being what they are they don't necessarily translate into action) the price hike will cause them hardship in competing with other paid for services, let alone free. But time will tell.

When companies have no real competition, they jack up prices massively.

I'm not so sure there's "no real competition": I know that I personally was already considering Amazon Prime just for the faster shipping. It's very likely that I'll now just subscribe to Amazon Prime for the faster shipping and free streaming, and downgrade my Netflix account to DVDs only (and eventually cancel it if I run out of DVDs I'd prefer to available streaming stuff).

Netflix did me a favor

I rarely and I mean rarely stream a movie because their streaming library sux. So I was able to drop the streaming portion of my plan and go back to just $7.99 per month for the single DVD at a time plan. That is the price I paid when I originally signed up before they bumped it to $9.99.

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You're pretending that movie licensing price is in any way determined by supply and demand. The studios are unilaterally raising their demanded price to license the content; it's not because the supply of digital movies is running out, but because they have monopoly control, that they can do this.

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There is a very limited number of movies, and demand to see them far outstrips supply

Say what? You must be the same guy that keeps saying this. The demand does not outstrip the supply because as far as I can tell, Netflix is able to stream whatever movie they want to as many people that want it. So supply appears to be keeping up nicely.

If Netflix won't pay the high price, someone else will and Netflix will have no flix

Ultimately it is the consumer who determines what it is worth to pay for the service and from their outcry, they aren't willing to pay the increase in rate. Nice try, but you fail once again.

Re: New Opportunites

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Governments don't establish monopolies in free markets. We live in a society plagued with government established monopolies and that's the main reason why prices are absurdly high in the U.S. No one is fooled into thinking otherwise, not even you. Even you know better.

Re: Sadly

Netflix

Um.... I have 4 discs at a time plus streaming. My price went up $2 a month. This was just under a 10% increase. And the quality of streaming offerings is going way up. Exactly how am I being so badly hurt?

I find it interesting the article's headline addresses the fact as a question. Come on, Netflix charging a rate increase because it's alone? Bullshit. If one recalls, Netflix lowered their prices despite the lack of competition, hence the streaming-only service at $1 less per month when it was changed.

I will never understand how Hollywood's bullying isn't illegal. "Give us your money or we'll bankrupt your ass".

I suppose it's an offer no one can refuse (and even if they don't, they still die).

The unfortunate part of all this: Netflix takes the hit as customers demand to pay monies to those forcing the issue.

Just once, I'd like the customer to say "Screw you, Hollywood. Fine, we'll just stop buying, renting, and going to the theater."

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Well, if you really believe sticking the head in the sand approach helps, then by all means feel free.

Fact is, digital content is to all intents and purposes infinite, the internet is here to stay, content will be on the internet and will be available for free.
There can be as many laws against it, and we can spend as much money as we like to prevent it but all that will do is waste time, money and a whole host of genuinely finite resources.
We have seen the results of attempting to criminalise what some wish to consider immoral, prohibition and the war on drugs to name but two. The results are, that you criminalise the average person and on top of that, if there is anyway for genuine criminals to make money from it, you enrich them too. The one thing you cannot do is meet the supposed aims of the legislation.

The advice generally given here, to the best of my limited understanding is that there are still plenty of ways for the people who create content to generate revenue from it and there are money generating ways of distributing content.
Unfortunately the legacy industries are so focused on trying to make the digital world an exact copy of the analog world that they are blinding themselves to the opportunities here.

To be honest, to me, the doomsayers and the strong anti-piracy brigade are being as foolish as the movie industry was when it attempted to get VCRs banned on the basis that they would destroy the movie business. They were not, in fact they were the saviour of it and the internet and new forms of digital distribution will also be their saviour.

The mission (should you choose to accept it) is to prevent them from destroying themselves whilst ruining the lives of many and hampering business and growth before they eventually come to grips with the much bigger playing field that the internet has created and the possibilities that it has opened up for them.

Here is what should be legal...

Netflix can buy all the DVDs they want and rent them out without the movie studios being able to do anything about it. But you stream a movie and now you are subject to license terms. What they should be able to do is buy 10,000 (or some number) of DVDs, copy them to their servers and stream up to 10,000 instances of that movie at one time. This would be no different in concept to renting out 10,000 purchased DVDs except the turn aroud time would be much quicker.

Even better, they should be allowed to buy 10,000, put 1 copy on their server and serve it up to 10,000 instances at a given time.

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One thing the Movie and Music industry does not understand is that piracy is competition. The only way to really fight it is to out-compete by giving better and higher quality and more convenient offerings. The dirty little secret is that "free" is not what drives most people to pirate sites it is availability and convenience that does.

The industry has put all their eggs in fighting piracy through litigation, onerous laws, and consumer unfriendly policies that do more to drive people away from them than entice people to take the legitimate route.

When the pirates are meeting the demand of consumers while the legitimate counterparts are putting up road blocks and hassles people are going to go to the pirates. It is human nature and no laws or pleadings or calling people thieves or "educational" campaigns are going to stop it.

Re: Here is what should be legal...

Possibly the real reason for DRM, yes it can be broken by anybody's sick cat, but just try to do anything reasonable in the movie distribution business such as what you suggest and the law hammer can come down on you and you'll just make a squelchy sound.

Re: Sadly

For the love of all that is sacred, why the hell can't they support Linux! I had Netflix and liked the service but I cancelled because I was tired of being treated like a second class citizen for not using Windows. I actually had Hulu plus for awhile because, shockingly enough, they had a Linux client for their Hulu Desktop app. That service ended up failing from my point of view because if I'm going to give you money then I shouldn't have to watch commercials.

Since Netflix has pretty much admitted that they'll never support Linux, I don't use their service or even recommend it to anyone that I know.

Let's wait and see...

I have a feeling there is a lot more going on here behind the scenes. Netflix needs to make new deals with content owners, and they need to position themselves in the best way possible to make these deals happen. These deals probably take into account the number of potential streaming customers. So, by separating out the Streaming vs. the DVD customers into distinct groups, they will have more accurate data to present going into these deals. Thus, they should be able to negotiate better (but probably still unreasonable) licensing fees.

I'm not sure what will happen, but I don't for one minute believe that this is a pure greed move on Netflix's part. This should ("should") result in better value for the customers in the long run.

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Re: Netflix did me a favor

I'm just the opposite. The Netflix envelope sits around for a month, and I can't even remember what's in it. Most of what I watch is streamed, so I dropped the mail service. Yes, if you're looking for specific titles, the streaming category is lacking, but if you approach it with the mindset of seeing "what's on", then there is always something interesting to watch. If both of us are representative customer types, they may have gotten this right from a user standpoint, but I think they might end up with LESS net revenue, since few may stick with both services.

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Voilá, MAFIAA succeeds in killing a nice business (and American jobs they talk about so much) and encouraging piracy. Sweet.

I wonder what trolls will have to say about it.. God knows how much they are already earning with the 'bad' initial licenses due to the freakish high volume of users watching stuff. But no, they want more. I think that if someday they have the entire money from the entire world in their pockets they'll still want more.

Re: Re: Re: New Opportunites

My movie backlog is large enough that waiting 4 more weeks for a new release is not a problem. I will rent what is out and catch the other movies when they are finally available. The delay isn't even a hindrance to me.

Also, the Netflix streaming catalog is a joke so it is not important to me. Yes, I would like an online service with good content, but Netflix ain't it. They might get there, but until they do, I am not paying inflated prices.

Re: Let's wait and see...

So, by separating out the Streaming vs. the DVD customers into distinct groups, they will have more accurate data to present going into these deals.

I've seen other people make this comment as well, but that doesn't make much sense. It does not tell you any more accurately what movies they will stream/how many movies they will stream. If they are keeping databases of viewing habits, which they are, they already have information on how much people stream movies vs getting dvds.

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hey you can get tb drives for pretty cheap, throw your favorite flavor of linux on a cheap pc, and archive away. Good way to make a cheap, expandable nas. And if you are feeling creative you can write a script that crawls the drives and converts them for you.

Maybe they want to wean folks off the DVD rental portion?

Let's see - moving bits from servers to users, minimal cost.
Moving disks from warehouse to users, high cost.
Getting disks back from users - somewhat unreliable.
Getting streamed data back from users - not needed.

Maybe Netflix wants to get out of the business of shipping plastic disks all over the US, and are trying to split the two features, so that they can alter the price of that component without affecting the critical mass of streaming customers. (After all, I can't help but think that any business that revolves around moving data from place to place on shiny plastic disks is doomed in the long run.)

Saw it coming

I read a few days ago an article about how Netflix's deals were coming due and while they got by with just paying hundreds of thousands to stream what they have the big studios were now demanding BILLIONS. As soon as I read that I knew this would be coming. I just didn't anticipate it so quickly. It's sad that most of the hate is being directed toward Netflix when it should be directed towards the movie studios. Aside from Linux support any problem that people have with Netflix can be tied back to old media content who don't understand that they overvalue their content and undervalue the service.

Unintended consequences?

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If Netflix won't pay the high price, someone else will and Netflix will have no flix. Basic, basic economics.

So let me see if I have your "basic" economics straight:

1. People will pay X dollars a month for a Netflix-like service.
2. People will NOT pay 2X dollars a month for a Netflix-like service.
3. The content companies will force Netflix to raise their rates to 2X in order to pay onerous new licensing fees.
4. Netflix will lose customers and go out of business.

(So far, we're on the same page, but then you continue with:)

5. New companies will enter the market and charge 2X for their Netflix-like service.
6. ???
7. Profit.

Re: Re: Re: New Opportunites

From my Android phone with the RedBox app, I can find what movies they have, search for a movie, find out where the boxes are with Google maps to their locations, and finally reserve a movie at a particular box and then go pick it up. (Haven't tried the reserve button yet, but it's there. Just started using the app.)

You can return DVD at any RedBox machine.

They have up to the moment inventory of what is in their machines.

While they may not be "online renting", their entire business is actually very much an internet business.

Re: Re: Sadly

I thought I just saw an announcement that netflix was going to be launching in some european markets later this year. No idea how their offering will compare to the US version, but at least it should be better than 'None'.

As far a release delays go I don't care. I typically add new movies to my queue before they are released to theatres and don't actually care when I get the disc.

Re: Re: Let's wait and see...

I'm not involved in this, so I can only speculate. But, IIRC, one of the reasons for Starz recently pulling some of their content from Netflix was because the Netflix user base exceeded some predetermined limit set in their licensing agreement. Had the DVD users not been factored into this user base count, things may have gone differently.

It would not surprise to find out that the studios want to receive X amount of dollars per streaming user (whether they actually stream that studios content or not). So, by separating the two groups, X dollars will be multiplied by a smaller user base and thus save Netflix money. Which then could mean they could afford to license more content which is a win for the customers.

Re: Here is what should be legal...

It's more cumbersome than that, but didn't we hear recently about a company doing online streaming of DVDs?

The cumbersome part was that they actually were renting DVD players remotely online. They might buy 10,000 DVD's, but they would then put them into 10,000 DVD players connected to their servers.

Hopefully this method of renting the DVD + Player will be found to not be infringing. Netflix and everyone else would have a whole new way to stream movies.

It would suck that the MPAA makes it hideously inefficient to actually need such as waste of resources (physical DVDs + physical DVD players). But all streaming services would suddenly be on equal ground as far as their basic costs are concerned.

Re: Re: Re: Sadly

As far a release delays go I don't care. I typically add new movies to my queue before they are released to theatres and don't actually care when I get the disc.

I do the same thing. And without having cable to watch all the ads about the movie release I generally don't even know it's on DVD til I get it in the mail. So it's not like I have to count down the 28 days til I get it.

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hmmm,

"greed is all this is" and "i'll just go back to doing what i did before netflix, having a bunch of harddrives filled with torrented material setup to stream in my house."

Entitled hypocrisy much? Netflix is greedy for requesting a higher subscription fee, but you are entitled to take whatever content you like and "fill hard drives" with it? That's a LOT of content, more than even a movie and TV buff would consume. It's an obsessive collecting habit, and it stems from the natural tendency toward hoarding, aka "greed."

Now, I don't like it when prices go up, either, but get your head straghit and think about it logically:
- Netflix can't exist if it doesn't make a profit, andthey have a right to pursue a profit.
- Netflix still costs a small fraction of cable, but with a bigger selection and a completely flexible schedule (as in, everything is on demand).
- Netflix streaming still costs the same: $7.99/mo. It's their dvd-by-mail business that has risen, and I'll happily drop that portion of my plan in favor of Redbox.
- Netflix has continually expanded the content available for streaming, so you are currently getting more than you were when you signed up, for the same price. Some price increases are to be expected. At least they did it in a way that doesn't force you into a more expensive plan by allowing you to cancel the DVD part.

I will grant the the message could have been communicated a but more apologetically, but to call it "pure greed" when they still offer the cheapest access to content, by far, is laughably disingenuous.

Re: Maybe they want to wean folks off the DVD rental portion?

Ain't happening Netflix doesn't want to go out of business. It's not their fault that streaming is becoming increasingly problematic. The greedy studios are the reason behind it. Have you seen any sane online business take off easily? I'd say itunes is what it is now because Apple did a good job into building a massive digital power (even though it's based in sand as there are other services competing and they can take off anytime). But in the end it doesn't matter which service you use, the content is reigned by artificial monopolies and the studios/labels determine the prices.

Piracy will always be the best alternative if they don't stop clinging to their old model and high prices. No law can stop piracy unless it completely tramples with basic human rights.

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You're asking the wrong question Mike. Obviously this is due to studio pressure. The real question is whether the studios are trying to milk Netflix for all it's worth or just marginalize them.

Hollywood executives have made no secret of the fact they believe Netflix and Redbox are harming them financially. Their ultimate goal is to stop being dependent on those 2 companies for their revenue. Besides the release window nonsense everyone is familiar with, there's also something called Ultraviolet, which all the major studios except Disney are involved in. The entire point seems to be to regain control over viewing by partnering* with everyone in between the studio and the viewer.

They have also been quite clear about their belief that the key to success is making others less competitive. They assume it's the content, rather than the service which is the draw. Obviously that's ridiculous. The studios already have all the content and have never been able to create a successful streaming or download business with it, whereas Netflix has a tiny subset of that and has managed to leverage that into piles of money. Nevertheless, killing the golden goose is a perfect description of what passes for a business strategy in the entertainment industry.

* In the same sense that a pimp partners with a 14 year old runaway on the street

Re: Re: Unintended consequences?

I don't mind paying for access & convenience, that's why all my music is downloaded or streamed. Have you seen any record stores lately? Video stores are extinct for the same reason: you don't need to buy or rent a physical copy. We want on-demand access. Why anyone thinks the future is in DVD & snail mail is beyond me. Stream ALL content and I'll pay a fair price. Everyone wins.

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You said: "if you really believe sticking the head in the sand approach helps, then by all means feel free".

Me: It has nothing to do with sticking ones head in the sand. Rather, it's understanding that the "market forces" in play here are not natural.

Fact is, while the distribution of digital content is near infinite (but not exactly, someone pays for the bandwidth and computers to do it), the creation of said content is not at all infinite, and rather is extremely limited. In plain and simple economic terms, the scarce resource is incredibly valuable, no matter what the price of actual distribution. The point that determines it's price isn't only on the distribution, but on the actual creation. Near infinite distribution of nothing would be meaningless, and to discuss it is pretty much a red herring.

The current level of piracy is about on par with having armed gang members in every store, 50% of the time taking the money from your sale or just giving your product away for fun. It isn't a tolerable business environment. Building business models based on it may be a functional short term way to keep from sinking your business, but this level of laying down with the dogs doesn't do anyone good over time... except perhaps the dogs.

We aren't going forward as long as the virtual version of armed thugs can take your customers and give them the products for nothing. Since both sides are depending on the same thing for survival (fresh new in demand content), the murder of the golden goose will leave both without purpose.

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It's not impossible to keep a straight face. I don't buy movies. I don't rent movies. I don't stream movies. I don't download movies. I don't watch movies on TV.

Friends occasionally bring their DVDs over and we'll watch them. Or we'll watch them at a friend's house. But most of the time, I play video games. They're much more interactive, and once you factor in the cost per hour of enjoyment, they're a fantastically cheap form of entertainment. I can play a 70 hour video game three times. Think you can watch that 2-hour movie 100 times?

Movies and TV suck. The total lack of interactivity combined with the malignant advertisers results in brain-rotting.

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No, I think it's more like the following:

1. People will pay X dollars a month for a Netflix-like service.
2. People will NOT pay 2X dollars a month for a Netflix-like service.
3. The content companies will force Netflix to raise their rates to 2X in order to pay onerous new licensing fees.
4. New companies will enter the market and charge X for their Netflix-like service because the content producers want to kill Netflix, even if it means creating something exactly like them.

Re: Re: Sadly

because they currently use silverlight and there is no way to stay within the open source licensing and release a silverlight player that cant be torn apart and have a means to just straight copy the stream to your drive.

at least... thats the fear thats stopping them.
which is the same reason why they wont allow netflix to run on android devices that do not have a locked bootloader.

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having a large collection of media to choose from is obsessive collecting habit? dude you are funny, a) its called porn, i've filled and lost more porn harddrives than you will likely ever even concieve, B) its called muscian discographies, c) tv series, lots of them D) and then the movies

all i want is convient access to media for a decent price, metflix provides a pretty good service but if the price goes up to something i feel is not worth it i can always go back to free and thats not greed.

you can't make me pay for something that i can get for free, unless you present it to me a better format.

i've frankly never used their dvd service i had it pretty much so that i dontneed to dl tv series all the time that i want to watch.

your trying to tell me im getting more for my buck even with the price increase but you still havent convinced me that i need to pay someone any more money than i do rght now for a bunch of 1's and 0's arranged in an arbitray manner.

Having a hard time understanding this outrage at Netflix's price hike. For me, they are going $20-$30 a month. I cut off my satellite subscription last year because everything I want to see with one exception is available on free Hulu, Netflix, or occasionally iTunes. Even with Netflix's price hike and the occasional iTunes rental/purchase, I'm still paying a heck of a lot less than I was paying with DirecTV. Some movies I want to see are new, others are not. I don't mind waiting. As far as I'm concerned, Netflix is still giving me a whole lot more in value than I'm giving them in cash. But that's my perspective.

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First off, Netflix does not have streaming rights for all movies. That is false, and isn't likely to change.

Second, while the consumers will ultimately decide, part of their decision is based on who has the content. If Netflix doesn't have the content but Amazon does, then you will see the public switching to get what they want. It's called competition, something that many don't appear to be familiar with.

Netflix is paying a price that it feels it can make money with, based on a given pricing structure. They also believe that the public will pay the rates in this structure.

In the long run, content will move to a streaming delivery. Netflix is positioning themselves to be the leader in the field. The increase in price may cost them some consumers in the short run, but I think that, just like the DVD delivery model, they have seen the future and are moving forward to be the best in their field.

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Yes I remember how horrified I was, that with all the money spent on creating Avatar, on release it became the most pirated movie of all time.
So obviously it made no money or at least a lot less than most other blockbusters.:/

How can anyone do business in a situation like that?
"Stands to reason people" like you, just don't get it.
Piracy is not an unnatural force, nor is it necessarily even a negative.

Re: Re: Let's wait and see...

When I first learned of the price increase, my immediate thought was that it was the work of content owners wanting to kill Netflix.

Mine too.

If in fact that was true, it would be nice if someone from the company 'leaked' it.

Time Warner Cable has been running ads all summer for their On-Demand movies, saying how they get them 30 days before Netflix and Redbox. Makes me mad every time I see one.

Of course, I wouldn't ever pay $4 to watch a movie that way over their p.o.s. cable box, just to see it a month sooner.

I figured sooner or later, either Netflix would cave and want to offer things up immediately, or the studios would just decide to not renew contracts when they were up - I'm guessing one or the other finally occurred.

How else do you create demand other than by artificially limiting supply on a product with no effective limits?

All streaming requires is bandwidth. That has been shown numerous times to be effectively 'unlimited' at today's demand rate.

Because it has become so pricey to view movies, I simply watch fewer of them. My total amount of disposable income spent on movies has actually declined over time because they are making fewer quality products and charging more for them.

To me this is the same as a lot of industries that get very large - they stop being interested in filling a need as marketing the product they decided to make.

Look how much money is spent on advertising versus market research. Take a look at recent articles about big pharma...

Money is the product. That is the only thing truly in demand, and in that case, we are the suppliers, and companies the demander's. They've got us all screwed around thinking it is the other way.

The real deal.

Actually, supply is increasing while demand remains relatively stable. More and more media continues to be released in formats that consumers can own permanently. This glut of content has driven prices on video media steadily lower to the point where you can even get BluRays for $5 in the Walmart bargain bin.

You can easily stockpile a large collection of your own classics and favorites without spending too much on it and amass that stockpile in a fairly short time.

The real threat to the industry is the back catalog. It's plentiful. It's cheap. And it makes a lot of the new stuff look like crap.

AppleTV2 is now a paper weight.

Re: Netflix

"Um.... I have 4 discs at a time plus streaming. My price went up $2 a month. This was just under a 10% increase. And the quality of streaming offerings is going way up. Exactly how am I being so badly hurt?"

I also have 4 discs at a time plus streaming. *MY* price went up $10 a month, a 50% increase. And the quality of the streaming offerings still sux. I've been a happy Netflix customer for 11 years so, yeah, I'm being hurt by this.

But hey, I learned something new from all this. Apparently Redbox has an iPhone app and a kiosk less than 2 miles from my house. Guess what *I* will be looking into tonight?

Virtual DVD Jukeboxes

> entitled to take whatever content you like and "fill hard
> drives" with it? That's a LOT of content, more than even a
> movie and TV buff would consume. It's an obsessive
> collecting habit, and it stems from the natural tendency
> toward hoarding, aka "greed."

One obvious advantage you get from "owning" anything is convenience. For content that I have possession of in my own home network, I don't have to indulge in any "streaming". The quality is better. The media features are better. I don't have to worry about the Internet flaking out or some bandwidth cap. I can sync it to any device of my choosing and not have to worry about any networking or "app support" issues.

I can either pirate or own copies of stuff for what I might otherwise pay for other options (Netflix, iTunes, Amazon, Cable).

If I am using Netflix for it, then it's clearly not worth much. I might just forget about it entirely (due to that 30 day window) and end up not seeing it until it's on broadcast TV. (had this actually happen a couple of times)

Netflix

I've never liked Netflix's streaming options. DRM. No Linux support. (And therefore) wasteful of bandwidth. Can't spool a whole movie, so I have to watch it in 5m snippets separated by 15m download. Plus it trashed the memory module on our Wii (only system in the house that would support it - I'm guessing it spooled to flash memory (!)). "Not interested, thank you."

Their DVD rental service is very good and fills a niche for rural customers who want access to a deep DVD catalog.

It has been good for that, and I'm not looking for the service to change. I'm delighted to (finally) be able to opt-out of their streaming business model and no longer pay for services I don't use.

Netflix is still infinity better than paying ridiculous theater prices, so I'll keep it. That said, it would be awesome if the Netflix price hike actually increases infringement and negatively impacts the movie industry's bottom line.

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The current level of piracy is about on par with having armed gang members in every store, 50% of the time taking the money from your sale or just giving your product away for fun. It isn't a tolerable business environment. Building business models based on it may be a functional short term way to keep from sinking your business, but this level of laying down with the dogs doesn't do anyone good over time... except perhaps the dogs.

What a rip off.

Calling their streaming service "unlimited" is rather disengenuous. It is far better to call it "very limited". Cable may cost more but it carries things that you will never see on Netflix in any form.

If Netflix anything were an actual replacement then your absurd and incorrect comparison might make some sense.

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I don't see it as greed per se. All the media reports are pointing to the Stars deal requiring a lot of money to keep it going... as will any future deal with any distributor. I see it as a necessary evil to maintain the content. Otherwise, there's no point in the streaming side.

Netflix streaming is a great opportunity for any movie to make bank. That's already been acknowledged by all major movie companies because they license their older movies that haven't made s*it for years to be streamed. Now all of the sudden those movies are making money and creating revenue streams that didn't exist just 2 years ago. Movie companies are stubborn and forget that streaming through Netflix is not owning the movie, therefore accepting a lowered royalty rate per stream (which will occur much more frequently than a purchase ever had, as the old movies have proven) is a huge opportunity to maximize profitability and even beat out competitors. A company that acknowledges the long tail and the inevitable changes Netflix has brought to home movie watching by filling Netflix's virtual shelves with their content will make money through a revenue stream that's never existed and no one else wants. It's all profit baby.

Rate hike or advertisements?

23 million subscribers who dominate bandwidth usage during peak times? I don't know what your thoughts are, but it sounds like a viable advertising space if done correctly. One ad per show/movie after you select your show to watch, but before the show begins playing. You wouldn't be able to skip past it, but it would only take 30 seconds and then no more ads until your next show. That's got to be worth some advertising dollars...

If it's one or the other, which would you prefer? I wonder what the ad revenue would be...

Maybe an opt-in option. Opt-in for ads and keep the streaming and DVDs at a single rate, or no ads and split the plans like they're planning.

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"It has nothing to do with sticking ones head in the sand. Rather, it's understanding that the "market forces" in play here are not natural. "

The market forces are that people can pay for access through Netflix, buy on iTunes, or find the same resources through Bittorrent, downloads, or a number of free resources. They are competing with free. Hulu has made money, Netflix did the same until the price hike and iTunes is still valuable money to those in the suits.

" the creation of said content is not at all infinite, and rather is extremely limited"

The burden of that cost is not felt by the consumer. They don't see it, therefore it's a fixed cost. They can choose to buy tangible goods and help a show they love to run longer or watch it in a variety of ways. That's entirely within the spear of influence of rights holders. However, rights holders no longer have power of distribution. They fight one free resource, two others pop up later on.

"The point that determines it's price isn't only on the distribution, but on the actual creation."

Uhm... No? Not unless you're openly admitting these companies are competing with a monopolistic competition mindset. The distribution costs can be covered in a variety of ways. The Big companies just haven't done them, instead opting for the same annoyances to customers that lead to piracy:

Windowing
Regionalization
High prices for digital goods

"Near infinite distribution of nothing would be meaningless, and to discuss it is pretty much a red herring."

... How so? It isn't a red herring, by any stretch of the imagination. Hell, it's a rather important issue. People want to find songs that they enjoy along with artists that they can listen to. If marketing has taught me anything, it's not the technical details of piracy that really matter.

People want just a few things:

Value
Convenience

If the product is more convenient with piracy, you're doing it wrong. If you're having a too high price, you're also doing it wrong. The expectations and profit margins are going to be different now that you have to compete with free.

"The current level of piracy is about on par with having armed gang members in every store, 50% of the time taking the money from your sale or just giving your product away for fun"

Piracy has nothing to do with drug sales. There's no force in setting up a link, or a bittorrent or a download. It happens. Because various options aren't available in other countries, downloads occur. If people could legally stream in other countries or what have you, piracy would decrease.

" Building business models based on it may be a functional short term way to keep from sinking your business"

Windsor Media has said similar things to what Mike says on a daily basis. He's not sinking with the dogs. They're thriving.

"We aren't going forward as long as the virtual version of armed thugs can take your customers and give them the products for nothing."

If they're offering a better product, then you need to improve. Walmart got to where it was by competing against Kmart and pushing smaller competitors to niche products. It happens.

The reason that most gamers love OCRemix is because anyone can remix any music and it's a thriving community. It doesn't take away from music, it adds to it. There are no armed thugs anywhere. Merely people sharing content in various forms.

"Since both sides are depending on the same thing for survival (fresh new in demand content), the murder of the golden goose will leave both without purpose."

I would love it if Netflix actually put up stats on its old shows... Just to see if your "demand for new content" is the problem, or distribution issues (such as labels having the power to define winners or losers by how much they charge is actually the issue.

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"your trying to tell me im getting more for my buck even with the price increase "

No, actually, I said "currently," meaning the rate you pay today. As in, you are paying the same price you used to, but they are giving you more.

However, if you've never even used the dvd service, then you WON'T EVEN SEE AN INCREASE, so I am left trying to figure out what the hell it is you think is so "greedy" on Netflix' part. Just switch to the instant-only plan, which hasn't increased, and save money by cancelling the DVD services you don't need.

And, yes, several hard drives full of content is an obsessive collecting habit. I know exactly what you mean from experience. I justified it the same way: selection. I used to spend literally hours a day perusing first Kazaa, then DirectConnect, then the torrent sites, just to find more to increase my selection. I'd stop at the computer whenever I walked past to check my downloads. Then, one day, I did the math. I realized that I had spent a lot of money on DVDRs and hard drives, and that I had watched less than 3% of my "collection." I realized that I could have watched a different movie every day for over 3 years, and never repeated a movie. And that didn't count the TV series. So, I gave it up. It was hard. It was a habit, and I literally felt drawn to it for weeks, until it dawned on me that while I wasn't spending time downloading content, I actually had the time to enjoy watching content.

So, now I get what I need from rental and streaming. Once I factor in the savings on data storage, it doesn't cost me more, but it's legal and it still provides a great selection with instant access. I still have no need for expensive cable, and if there is some rare, out-of-print or difficult-to-find title that I really have a hankering to watch, I can still go find a torrent. I don't have to have it on local storage to be happy. I know that, if I want it, it's out there somewhere.

Re: Netflix did me a favor

I never even noticed the change... I only subscribe to the streaming service, because I don't like the hassle of DVD's, and the netflix app on my Roku box delivers the movies right to my TV. The selection isn't great, as you mention, but I also have Hulu+ and there are enough shows on there to fill most of my TV watching time anyway... Ever since I got the Roku and cancelled my cable subscription (saving over $100 every month) I started reading a lot more too.

Either way, I have found that people really only care that much for one or the other, either the streaming or the DVD's, but not usually both together. For me, Amazon Video On Demand has a better offering than Netflix's DVD library anyway, so if I really really want something that I can't stream on netflix, I'll pay the extra $5 and get it, still on my Roku from the comfort of my couch. And it only happens every couple of months, so it balances out pretty well.

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"It has nothing to do with sticking ones head in the sand. Rather, it's understanding that the "market forces" in play here are not natural"

I don't know what your idea of natural market forces are, but apparently it doesn't extend to "what people actually do"
Any business that doesn't take that into account, is going to go bust, saying it's unnatural and people shouldn't do it, should remind us of yet more "moral" legislation, like laws against homosexual acts etc. another big winner in history.

Re: Netflix

Might want to check that I went up to $29.98.

I sent them a nice letter explaining that I expect a letter before Sept 1 stating that current subscribers are going to be grandfathered in. If I don't get that I'll drop Netflix. It will hurt emotionally, I've been with them over a decade, but I'm already having a hard time justifying the $22 a month(with taxes). The one kid who watches a lot will be leaving for college in Sept so this is convenient timing for me.

Something that doesn't get discussed much is how digital OTA broadcasts are changing viewing. My picture is awesome and I've got 13 channels of **** on the TV to choose from.

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No, this is how it will go -

1. People will pay X dollars a month for a Netflix-like service.
2. People will NOT pay 2X dollars a month for a Netflix-like service.
3. The content companies will force Netflix to raise their rates to 2X in order to pay onerous new licensing fees.
4. People will drop the streaming service but continue to pay 0.6X for DVD rental.
5. Netflix will continue to prosper but the studios will lose.

The End

Just another nail in the coffin. Like the big wireless providers going to tiered data charges, greed will kill off the smartphone / tablet craze and we can get back to or normal routine and save our cash for more important things like food.

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That doesn't make sense. Netflix is just going to pass any price increases on to the customer (which is what they doing now). If people won't pay that price, and Netflix goes out of business, how will the content providers continue to make money from customers' desire for a Netflix-like service?

Re: Sadly

I don't know. The same day the news broke that they were raising prices, I got an email from them, detailing the changes and letting me know what my options where. Also, they have a Facebook page and a forum (not that I use Facebook).

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It makes perfect sense, but as a consumer, you hate that happening to you every 3 months. It is just poor ethical practice in a business setting. How would you feel if your landlord (good for you if you own a home) comes to you and say, I have to increase your rent by $100 or you have to move out by tomorrow?

Re: Netflix and Zediva

NetFlix should create a spin off company that takes all their old DVD and does the Zediva thing. Zediva rents DVD's online and streams them to you. With out needing to mail them. If they were to do this, they would be able to keep the prices low, and ignore hollywoods strong arm tactics.

Alternately, if someone were to create a distributed streaming app, that does the same thing as Zediva, it would end Netflix and zediva.

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Netflix streaming still costs the same: $7.99/mo. It's their dvd-by-mail business that has risen, and I'll happily drop that portion of my plan in favor of Redbox.

Exactly. I cannot see what the problem is.

When I received the email and went to the site, I read that they were allowing me to chose one or the other, or keep both. A win in my book. I use both, and amazingly, I did the math and realized that I was going to pay the same for both from what I currently was paying now, so I am not sure where the 60% is coming from. My cost hasn't increased, but my options have been increased if I want to decrease my cost. Since they didn't allow me to separate them before, and now they are, I saw it as a win.

If I felt RedBox (which I still have to go to 7-Eleven 2.25mi away from me in order to use,) was a better deal, I'd drop the DVDs and just go with the streaming. However, even though I run 3.2mi every other day to 7-Eleven 2.25mi away from my house (I don't go there directly, but run in a random pattern to get there,) it still isn't worth the effort to get them from RedBox, for me.

Thus, I am paying more ($13.99/mo at current cost listed on their site,) versus $1/ea at RedBox and yet I am still going to stay with them (partly because at 30 days, that would be at least $15 if I rented one movie each time I ran to 7-Eleven, vs 3 at a time, 1-2 times a week.)

Netflix just got greedy

Perhaps a $6/month increase is no big deal and yet proportionally a 60% rate hike is pretty huge especially given that this last year Netfix earnings are up 88% and their stock price is 6 times what it was a year ago ($300 from $50/share). They are making money hand over fist so in my perspective a 60% increase in their monthy subscription rate is just plain greedy and representative of exactly what has gone wrong in America. Netflix became the peoples choice because they offered a great service at a reasonable rate especially when put up against other entertainment providers like cable companies and movie theaters who were greedy first. Just my $2 worth.

Re: Let's wait and see...

Netflix has databases on all this info already. They know exactly who is streaming what and who is going physical dvd. What they may not know for certain is which one, streaming or physical dvd, is preferred. I'm not sure I accept your premise that Netflix is doing this to sort out where there real market is rather than to generate extra income.

I don't see the big deal

When many people (including me) signed up for netflix, they dind't even offer streaming. Then we got streaming for free for a while but if anyone thought that was indefinitely sustainable then that person is a moron. Now we have to pay for it as was always expected. It seems fair to me and I'm glad I was able to enjoy it for free for a while. In reality, I've always considered streaming and physical disks to be two totally different things that Netflix offered and always knew they'd eventually split it up, or just as they've been saying, completely eliminate dvds. I wonder if people would be this mad if netflix said they're eliminating dvds instead of just making you pay for them separately. In the end it's the same thing.

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"iTunes and Netflix are available in the US, yet piracy numbers are still too high."

Define "too high".

Netflix currently accounts for significantly more internet traffic in the US than torrents (http://www.theregister.co.uk/2011/05/25/netflix_bittorrent_traffic_share/), and I bet half the remaining pirate traffic is directly due to the artificial windowing enforced by the studios. I'll also bet that illegal traffic drops significantly again once Spotify are finally allowed to launch there (and remember torrents are not all illegal by a long shot).

Piracy will never be zero, as it had never been zero at any point for the last couple of decades pre-internet. But, it can be made insignificant.

"Fact is, many people are greedy freeloaders that would rather illegally take something for free rather than pay for it- if they know they can get away with it."

...and the large majority of those people wouldn't pay if piracy somehow disappeared - they'd borrow copies, wait for TV or just go without your unnecessary product.

"Therefore, law enforcement must act."

Or the industry can, you know, compete. This is shown to be a viable option that doesn't remove rights or have disastrous unintended consequences for those who do pay.

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You're making the usual logical fallacy here - that the content is the only factor. If Netflix provides the best service but their content is lacking, some might prefer that (or switch back to cable, or DVDs, or something else) than going to the second best player. Netflix gained popularity because of its service and convenience, not simply because your content was there.

"Consumers will pay for a Netflix type service because it is still on par or cheaper than their cable bills, their movie rental bills, or their purchase prices for DVDs."

But, isn't the argument that the licencing is too expensive? That this cost needs to be passed on to customers? If Netflix starts costing the same as or more than those, why wouldn't they switch back, especially as they're lacking the extras you get with those services (resale/lending rights with DVDs, sports, first run TV and other extras on cable, and so on)?

"Their option in no paying is living without the content they desire, or breaking the law to get it."

You'd be amazed at how many people might find they can live without Transformers 4 or the 10th remake of War Of The Worlds if they need to.

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"They are also USA only (maybe Canada too) so we in the EU are stuck with Lovefilm."

I wish! Thanks to the content industry's destruction of the European free market where digital content is concerned, Lovefilm are not allowed to service me in Spain. Neither is any equivalent service (and they complain about high piracy in Spain... any link, I wonder?).

The current rumour is that Netflix will start to service the Spanish market in January 2012, but this is unconfirmed. I'm first in the queue if this is true, and hopefully they will spread across the rest of Europe soon after.

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He's an idiot who can't formulate an actual argument, and so resorts to wild accusations and personal insults when proven wrong on his assumptions. I'm honestly sure that the reason he doesn't create a login is so that new readers can still be confused and taken in by his arguments without a long history of moronic ramblings to easily point to.

Anyway, if my presumption is correct, this is the same person who has admitted to having been part of the music industry and failed, blaming piracy for all his woes. If the attitude and actions of the industry can be said to be at the core of the industry's problems, we only need to read his posts as exhibit A as to how this is true. His type will soon die out, and those left in the industry will hopefully return to servicing their customers rather than cutting their noses off to spite their faces. At least, they'll stop trying to turn back the clock and pretending it's 1994.

Massive price hike? Have we become so accustomed to receiving enormous value at a small cost that we can't fork over another eight bucks? All the movies you can stream, all the movies you can watch (admittedly one at a time) for $16.00? Amazing...

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imitation is a form of copying. Copying is natural. Without IP laws people would naturally do it without a second thought and even with IP laws people naturally do it. Most of the population ignores IP laws (ie: China) exactly because copying is natural. The Bible and many ancient texts were copied many times down through history. Beethoven and Mozart music was made without IP, and they were copied and lived to see today. There is absolutely nothing unnatural about copying.

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You cannot build roads assume people will drive on either side of the road, or that people will jaywalk everything, or that people will ignores the rules of the road. You have to build a road assuming legal activity. You may have to put up some fencing to keep people from jaywalking in the middle of the block, you may paint lines to help car drivers know where to go, but in the end, you make the road based on the laws and they way they work, and not on what people actually do.

I have to applaud you for trying to tie piracy to homosexual acts. It's an amazing reach that shows incredibly amounts of desperation. Couldn't find anything closer at hand that made sense?

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Copying is something that the government must artificially put a stop to in order for it not to occur frequently. Copying is natural because it exists apart from the artificial actions of a government. For a government to artificially put a stop to copying is unnatural.

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Government endeavors are unnatural. Something that is natural is something that occurs apart from the artificial laws of a government.

That's not to say that all governmental laws are bad. I can reasonably agree with a government that artificially punishes murder without agreeing with a government that artificially bans the drinking of water.

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It's worse than a logical fallacy. It's a verifiable hypothesis which has already been disproven.

The studios have made multiple attempts to sell content online. Hell, Sony has the entire content creation and distribution chain covered from end to end. They produce the content, own the copyrights, have a content network, and produce all the hardware required for accessing it. And yet they can't turn all that into a viable online content business.

If it was all about the content, there would be no market for Netflix streaming to begin with. Since it's the studios, not Netflix, who have failed repeatedly in the market, we don't need to debate whether content is the key. We already know it isn't.

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"I have to applaud you for trying to tie piracy to homosexual acts"

I didn't, you did by calling it unnatural, I simply pointed out other laws that were justified by calling the act being banned "unnatural" as well as the relative success of such legislation in preventing the behaviour deemed unnatural and immoral.

Unfortunately your road metaphor really doesn't work.
The rules governing road use are fundamentally agreed to and /or accepted by the vast majority of users, government agencies etc etc.
The overwhelming majority don't drive on whatever side of the road they happen to feel like because it is damaging and dangerous to themselves and others to do so. There isn't areal a correlation between that and someone copying something without permission.

The fact is that the only argument against piracy (meaning copying) is a moral one.
There is no evidence of harm to any party from it, much as you may think it stands to reason that there must be.
The industry has had to invent purely fictitious losses to even attempt the argument that there is harm.

A lot more study needs to be done before any major benefit or harm can be safely ascribed to piracy, but on the surface of it, each passing year suggests that there is a correlation between the economic success of a product, whether music or film or whatever and the amount of copying of that product, they seem to rise and fall in lock step.

Re:

Yeah, Netflix set the price at $8 for 1 DVD and unlimited streaming, and they got people used to that price. Now, they essentially doubled that price; regardless of the amount, it's still 200% more than it was last month. At that price point, it's probably worth scrapping the DVD by mail subscription and just hitting up your local Redbox/BB Express. Unless you really watch more than 8 movies per month (or keep the discs out for more than 8 days total).

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Actually, now that I think about it, it used to be $9.99 for the streaming + 1 DVD, so they've only hiked it up $5/mo, not $8 like I thought. My point still stands though; cheaper way to get the discs, should you really care for that medium.

Does the price hike even matter that much? How many people are paying for the DVD mailing right now; what percentage of their customer base is even using that? I suspect they will lose some of those subscriptions, but most, if not all, will continue paying for the streaming since that price hasn't changed at all.

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To use your analogy of roads, let's look at it this way. Say your local township puts in a road and then implements all kinds of rules for using it; speed limits, lanes, signs, lights, etc; the parts you expect from any road really. Then, they decide to put a toll on that road. Now, some people will pay this toll, provided it makes their trip shorter/faster or exposes them to less traffic or any number of other reasons. Others, however, will choose other routes that don't have this toll, despite it taking longer to drive or having more stop lights or whatever other inconveniences it may have.

Here, the toll road represents the legitimate sales avenues and the free road represents illegitimate avenues. As long as the convenience of the tolled road is not outweighed by the cost to use it, they will have people paying the tolls and using the road. Once that price gets too high, or the road becomes inconvenient, people will stop paying that toll and just use the free route.

What most of the media industry has done is demand a lot of money to use their road while at the same time making it far less convenient than using the free road.

We do see some great examples of companies that balance their price and convenience brilliantly though. Apple's iTunes and Netflix are 2 shining examples; they both charge money for the same things people *can* get for free, but the cost is low enough and the convenience is high enough that most people rather pay for the convenience of delivery than spend the time routing around the price.

All this to say: if your business isn't accounting for the other forces on the market, natural or unnatural, legal or illegal, you can't expect success, and no amount of litigation is going to make you a success. A small number of people will always do everything they can to not pay and trying to get them to is a waste of time. But, there's still a HUGE market waiting to give you money for things they could otherwise get for free if you can just balance the cost and convenience properly.

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Screw the movie studios

Damn the movie studios for DRM, and their mediaevel (misspelling intentional) licensing policies. If they really want to reduce piracy, make the damn films available on line for streaming thru Netflix, Amazon and other reasonably priced, easily accessible venues. Greedy, mindless and ultimately self-defeating.